Small investors have never been this bullish

Retail investors have never been this hopeful that the stock market will continue to grind higher, according to a University of Michigan survey.

The preliminary survey of consumer sentiment for September showed a record 65% expected probability that stocks would rise in the next year. The data goes back to 2002.

A report in February showed a minor increase in expectations for a sustained rally after President Donald Trump's election. But several record closing highs later — 39 this year for the Dow as of Friday — individual investors are a lot more expectant.

The February report noted that people who were most bullish for the year ahead and could invest more in stocks were in the top third of income distribution and in the top tier of stock ownership. In other words, the respondents to this survey have reaped strong gains on a riskier asset class in a short period of time and are hoping this continues.

But this may be a sign that the opposite is about to happen, said David Rosenberg, the chief economist at Gluskin Sheff.

"For an investment community that typically lives in the moment and extrapolates the most recent experience into the future, it would only fall on deaf ears to suggest that peak confidence like this and peak market pricing tend to coincide with each other," he said in note Monday.